Fidelity is raising its valuation for X Holdings, the company formerly known as Twitter, after months of marking its small stake down since Elon Musk bought the social media company.
What Happened: Fidelity holds a small stake in X Holdings through its Fidelity Blue Chip Growth Fund (FBGRX). Its monthly holdings updates regularly reveal how the financial firm values the social media platform compared to the $44 billion Musk originally paid.
After marking down the value of its X Holdings stake for several months in 2024, the month of October brought good news for X fans and investors.
Fidelity increased its valuation for X Holdings by 32.37% in October, which marks the biggest one month increase since Musk's 2022 buyout, as reported by Axios.
While the valuation increase is large, X Holdings is valued at around $12.3 billion overall, or around 72% less than the $44 billion Musk paid.
Fidelity does not disclose what methods are used to increase or decrease the valuations of the private companies held in the mutual fund. In the past, rises in valuations of peer social media companies have contributed to the monthly increases for X Holdings by Fidelity.
Snap Inc (NYSE:SNAP) shares were up 12.8% in the month of October. Meta Platforms (NASDAQ:META) shares were down 1.8% in October. Trump Media & Technology Group (NASDAQ:DJT) shares were up 105.1% in October.
The rising valuation of Snap and Trump Media may have contributed to the increased valuation. Another factor could be X Holding's stake in xAI, an artificial intelligence company founded by Musk. Fidelity invested $6 billion in xAI's Series B round and increased the valuation of that stake by 70% in October.
xAI is nearing the completion of a $5 billion funding round, which could double the company's valuation to $50 billion according to new reports. Investors who helped Musk take Twitter private are also set to receive stakes in xAI, according to the report.
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Why It's Important: Investors should keep in mind that Fidelity's latest valuation metric is based on the month of October, which means the next report could provide another sizable increase to Fidelity's valuation.
The 2024 election win by Donald Trump has had a positive impact on the valuation of other Musk companies, including Tesla Inc (NASDAQ:TSLA). The president-elect's friendship with the billionaire and his support for initiatives aligned with Musk's interests have contributed to this impact.
Tesla stock closed at $251.44 on Election Day and shares are now up 40.5% since the election. Musk's wealth has increased $113 billion year-to-date in 2024 to $343 billion according to Bloomberg, with a significant increase coming since Trump's election win.
With other Musk companies seeing increases in valuation and X seeing increased engagement during the month of the 2024 election, Fidelity’s valuation of X could rise further in November.
Fidelity initially invested $19.66 million in X through its mutual fund. Following the latest valuation rise, the stake is now valued at $5.5 million, according to the company.
Musk has recognized that he likely overpaid for Twitter over the years, but he also has grand plans to turn the company into his vision of an everything app that will include social media connections, video, and financial payments.
After paying $44 billion for the company, Musk may have reduced its valuation by assigning a lower price point to employee stock awards.
Months later, Twitter was valued at $20 billion when stock awards for the company's employees were announced in March 2023. While the valuation of the stock awards was less than half of the price Musk paid, the then-CEO said he was optimistic about the company.
“I see a clear, but difficult, path to a <$250B valuation,” Musk said at the time.
For Fidelity, the loss on the X investment may be minor, with the Fidelity Blue Chip Growth Fund mutual fund having a small stake in the company. The fund invests in private and public companies and is likely helped by the fact that the largest holdings in the fund are currently large technology companies. Here are the current top 10 holdings:
- NVIDA Corporation: 14.4%
- Apple: 11.2%
- Amazon.com: 8.2%
- Microsoft Corporation: 7.4%
- Alphabet Inc: 5.9%
- Meta Platforms: 5.2%
- Marvell Technology: 3.1%
- Eli Lilly: 2.6%
- Netflix: 2.2%
- Snap: 1.5%
Tesla is the 14th largest holding in the mutual fund, representing around 0.98% of its assets. SpaceX is listed several times in the fund's holdings with various series and investment types, with the largest holding representing 0.52% of the fund's assets.
Along with its stake in privately held X Holdings, the Fidelity Blue Chip Growth Fund also owns stakes in some of the most well-known private companies like SpaceX, Fanatics, Stripe, Epic Games, Anthropic, Waymo and Relativity Space.
Ark Funds, which owns a stake in X Holdings via the Ark Venture Fund, has also often changed the valuation for its stake in the social media company.
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